Royal Group Technologies
Encyclopedia
Royal Group Technologies is a large Canadian building supplies maker and plastics company. Based in Woodbridge
, Ontario
it also has operations in much of Latin America
and in Poland
and China
. In the 2000s it was plagued by scandals and financial loses.
The company was founded as Royal Plastics Group in 1970 by Vittorio "Vic" De Zen. It quickly rose to become on of Canada's largest plastic
makers, specializing in PVC
pipe, window profiles, and other plastics products. It had its own chemical plant in Bradford, Ontario
and a large PVC recycling facility. The company developed the Royal Building System, a construction technique using PVC frames filled with concrete
, that allows very sturdy structures to be constructured in only a few days. It also moved into other areas, such as lawn furniture. It also moved into metals with its Baron Metal subsidiary.
The company went public in 1994, and the stock rapidly increased and three years later De Zen's own holdings were worth $600 million. Because of generous stock options some 200 other employees became millionaires as well. In 1997 the company was renamed Royal Group Technologies as sale grew to $2 billion per year.
In 2003 investors began to complain about the company, which was seeing falling earnings. De Zen retained over 80% of the votes at shareholders meeting, and continued to pay himself a multi-million dollar bonus. The stock price collapsed from over $30 to under $7 in little over a year. Losing money, it placed its money losing window covering
s division under new management. In November 2003 De Zen resigned as CEO, being replaced by Douglas Dunsmuir. He remained chairman, and through his stock holdings control of the company. The stock recovered somewhat, increasing in value by over 70% over the next months.
However in February 2004 the Ontario Securities Commission
and RCMP
announced that they were investigating the company in connection with land deals in the Caribbean. The stock again fell sharply. This caused problems for Greg Sorbara
, a former Royal Group board member, who had become Ontario's finance minister in 2003. The investigation focused on De Zen, Dunsmuir and former CFO Gary Brown. It was alleged that the Royal Group has defrauded shareholders in its relation with a resort owned by the executives on the island of St. Kitts. De Zen and his brother in law, Fortunato Bordin, had borrowed $114 million from Scotiabank
to build the resort. Scotiabank headquarters were raided by 25 members of the RCMP's Integrated Market Enforcement Team on 1 February 2005 "to collect documentary and other evidence in connection to the ongoing criminal investigation into the financial activities of Royal Group Technologies Ltd. ".
In November 2004 forensic auditors found what was then regarded as a suspicious land deal in Canada in which De Zen and other executives had bought land and then resold it to the company. They found that a 75 hectare lot in Woodbridge had been purchased for $20.5 million and then resold to Royal Group that same day for $27 million. The company fired De Zen as chairman, Dunsmuir, and new CFO Ron Goegan. James Sardo was appointed as the new CEO. The scandal also affected Scotiabank, the company's banker, which was subject to a high profile RCMP raid in February 2005.
In March 2005 De Zen relinquished control over the company when he exchanged his multiple-voting shares for common stock. This left the company an attractive target for a takeover attempt. It was reported that Cerberus Capital Management
was preparing a $1.3-billion bid for the firm. The company put itself up for sale in the spring of 2005.
Georgia Gulf Corporation
, a large PVC raw-material manufacturer, completed its acquisition of Royal Group on October 3, 2006 for $1.6 billion.
The trial respecting the allegations made against Mr. De Zen and others commenced in April 2010. Crown prosecutors
had sought a jury trial
, but the Ontario Superior Court noted that "the Crown engaged in an "abuse of process"" and denied the request.
On December 10, 2010, at the conclusion of the five-month trial, the trial judge acquitted the defendants of the two charges they faced. The trial judge found overwhelming evidence supporting the defence that no fraud, no deceit, no dishonesty and no concealment had taken place. Indeed, the judge indicated that it would be a "travesty of justice" to wait even one day before pronouncing the verdict of not guilty.
Woodbridge, Ontario
Woodbridge is a large suburban community in the City of Vaughan, just north of Toronto in Southern Ontario. It was once an independent town before being amalgamated with nearby communities to form the city in 1971. Its traditional downtown core is the Woodbridge Ave...
, Ontario
Ontario
Ontario is a province of Canada, located in east-central Canada. It is Canada's most populous province and second largest in total area. It is home to the nation's most populous city, Toronto, and the nation's capital, Ottawa....
it also has operations in much of Latin America
Latin America
Latin America is a region of the Americas where Romance languages – particularly Spanish and Portuguese, and variably French – are primarily spoken. Latin America has an area of approximately 21,069,500 km² , almost 3.9% of the Earth's surface or 14.1% of its land surface area...
and in Poland
Poland
Poland , officially the Republic of Poland , is a country in Central Europe bordered by Germany to the west; the Czech Republic and Slovakia to the south; Ukraine, Belarus and Lithuania to the east; and the Baltic Sea and Kaliningrad Oblast, a Russian exclave, to the north...
and China
China
Chinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...
. In the 2000s it was plagued by scandals and financial loses.
The company was founded as Royal Plastics Group in 1970 by Vittorio "Vic" De Zen. It quickly rose to become on of Canada's largest plastic
Plastic
A plastic material is any of a wide range of synthetic or semi-synthetic organic solids used in the manufacture of industrial products. Plastics are typically polymers of high molecular mass, and may contain other substances to improve performance and/or reduce production costs...
makers, specializing in PVC
Polyvinyl chloride
Polyvinyl chloride, commonly abbreviated PVC, is a thermoplastic polymer. It is a vinyl polymer constructed of repeating vinyl groups having one hydrogen replaced by chloride. Polyvinyl chloride is the third most widely produced plastic, after polyethylene and polypropylene. PVC is widely used in...
pipe, window profiles, and other plastics products. It had its own chemical plant in Bradford, Ontario
Bradford, Ontario
Bradford is the primary country urban area of the Town of Bradford West Gwillimbury, Ontario, in Canada. It overlooks a beautiful and prosperous farming community, known as The Holland Marsh, located on the Holland River that flows into Lake Simcoe...
and a large PVC recycling facility. The company developed the Royal Building System, a construction technique using PVC frames filled with concrete
Concrete
Concrete is a composite construction material, composed of cement and other cementitious materials such as fly ash and slag cement, aggregate , water and chemical admixtures.The word concrete comes from the Latin word...
, that allows very sturdy structures to be constructured in only a few days. It also moved into other areas, such as lawn furniture. It also moved into metals with its Baron Metal subsidiary.
The company went public in 1994, and the stock rapidly increased and three years later De Zen's own holdings were worth $600 million. Because of generous stock options some 200 other employees became millionaires as well. In 1997 the company was renamed Royal Group Technologies as sale grew to $2 billion per year.
In 2003 investors began to complain about the company, which was seeing falling earnings. De Zen retained over 80% of the votes at shareholders meeting, and continued to pay himself a multi-million dollar bonus. The stock price collapsed from over $30 to under $7 in little over a year. Losing money, it placed its money losing window covering
Window covering
Window coverings are material used to cover a window to manage sunlight, to provide additional weatherproofing, to ensure privacy or for purely decorative purposes....
s division under new management. In November 2003 De Zen resigned as CEO, being replaced by Douglas Dunsmuir. He remained chairman, and through his stock holdings control of the company. The stock recovered somewhat, increasing in value by over 70% over the next months.
However in February 2004 the Ontario Securities Commission
Ontario Securities Commission
The Ontario Securities Commission is a regulatory agency which administers and enforces securities legislation in the Canadian province of Ontario...
and RCMP
Royal Canadian Mounted Police
The Royal Canadian Mounted Police , literally ‘Royal Gendarmerie of Canada’; colloquially known as The Mounties, and internally as ‘The Force’) is the national police force of Canada, and one of the most recognized of its kind in the world. It is unique in the world as a national, federal,...
announced that they were investigating the company in connection with land deals in the Caribbean. The stock again fell sharply. This caused problems for Greg Sorbara
Greg Sorbara
Gregory Sam "Greg" Sorbara, MPP a member of the Legislative Assembly of Ontario for Vaughan. Sorbara served as the Minister of Finance in the Ontario Liberal Party government of Premier Dalton McGuinty from 2003 to 2007.He resigned on October 11, 2005, following a police investigation involving...
, a former Royal Group board member, who had become Ontario's finance minister in 2003. The investigation focused on De Zen, Dunsmuir and former CFO Gary Brown. It was alleged that the Royal Group has defrauded shareholders in its relation with a resort owned by the executives on the island of St. Kitts. De Zen and his brother in law, Fortunato Bordin, had borrowed $114 million from Scotiabank
Scotiabank
The Bank of Nova Scotia , commonly known as Scotiabank , is the third largest bank in Canada by deposits and market capitalization. It serves some 18.6 million customers in more than 50 countries around the world and offers a broad range of products and services including personal, commercial,...
to build the resort. Scotiabank headquarters were raided by 25 members of the RCMP's Integrated Market Enforcement Team on 1 February 2005 "to collect documentary and other evidence in connection to the ongoing criminal investigation into the financial activities of Royal Group Technologies Ltd. ".
In November 2004 forensic auditors found what was then regarded as a suspicious land deal in Canada in which De Zen and other executives had bought land and then resold it to the company. They found that a 75 hectare lot in Woodbridge had been purchased for $20.5 million and then resold to Royal Group that same day for $27 million. The company fired De Zen as chairman, Dunsmuir, and new CFO Ron Goegan. James Sardo was appointed as the new CEO. The scandal also affected Scotiabank, the company's banker, which was subject to a high profile RCMP raid in February 2005.
In March 2005 De Zen relinquished control over the company when he exchanged his multiple-voting shares for common stock. This left the company an attractive target for a takeover attempt. It was reported that Cerberus Capital Management
Cerberus Capital Management
Cerberus Capital Management, L.P. is one of the largest private equity investment firms in the United States. The firm is based in New York City, and run by -year-old financier Steve Feinberg. Former U.S...
was preparing a $1.3-billion bid for the firm. The company put itself up for sale in the spring of 2005.
Georgia Gulf Corporation
Georgia Gulf Corporation
The Georgia Gulf Corporation has historically been a major manufacturer and marketer of chlorovinyls and aromatics...
, a large PVC raw-material manufacturer, completed its acquisition of Royal Group on October 3, 2006 for $1.6 billion.
The trial respecting the allegations made against Mr. De Zen and others commenced in April 2010. Crown prosecutors
Crown attorney
Crown Attorneys or Crown Counsel are the prosecutors in the legal system of Canada.Crown Attorneys represent the Crown and act as prosecutor in proceedings under the Criminal Code of Canada...
had sought a jury trial
Jury trial
A jury trial is a legal proceeding in which a jury either makes a decision or makes findings of fact which are then applied by a judge...
, but the Ontario Superior Court noted that "the Crown engaged in an "abuse of process"" and denied the request.
On December 10, 2010, at the conclusion of the five-month trial, the trial judge acquitted the defendants of the two charges they faced. The trial judge found overwhelming evidence supporting the defence that no fraud, no deceit, no dishonesty and no concealment had taken place. Indeed, the judge indicated that it would be a "travesty of justice" to wait even one day before pronouncing the verdict of not guilty.
External links
- Official site
- SEC filings
- FORM 40-F filed May 2005 for 2004 fiscal year
- Royal Group Technologies, Ltd. at Stanford Law SchoolStanford Law SchoolStanford Law School is a graduate school at Stanford University located in the area known as the Silicon Valley, near Palo Alto, California in the United States. The Law School was established in 1893 when former President Benjamin Harrison joined the faculty as the first professor of law...
Securities Class Action Clearinghouse - TORONTO AREA IMET LAYS FRAUD CHARGES AGAINST FORMER EXECUTIVES AND EMPLOYEES OF ROYAL GROUP TECHNOLOGIES LIMITED (RGTL) at RCMP website